Grant’s Interest Rate Observer editor Jim Grant explains why inflation won’t easily fade away on ‘Making Money.’
The Federal Reserve left interest rates unchanged at its March meeting for the fifth straight time as inflation remains high for many Americans. Policymakers also clarified that plans to cut rates may be pushed out further but remained committed to three this year.
“The economic outlook is uncertain, and the Committee remains highly attentive to inflation risks,” policymakers noted in a statement.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| SP500 | S&P 500 | 5224.62 | +46.11 | +0.89% |
| I:DJI | DOW JONES AVERAGES | 39512.13 | +401.37 | +1.03% |
| I:COMP | NASDAQ COMPOSITE INDEX | 16369.407494 | +202.62 | +1.25% |
Stocks rallied on the news, pushing the S&P 500 above 5,200 for the first time, on the view that rate cuts remain on the table. All three of the major averages are sitting at records.
The decision, which was widely expected, keeps the federal funds rate between a range of 5.25% to 5.5%, a 22-year-high. This will also keep rates for mortgages, loans and credit cards at elevated levels.
The CME’s FedWatch Tool, had expected as many as six rate cuts at the start of the year, but now with three baked in, the Federal funds rate would be at 4.6% by year’s end.
CONSUMER INFLATION HOTTER THAN EXPECTED IN FEBRUARY
Inflation has not subsided as quickly as policymakers had expected. In February, consumer prices on an annual basis rose 3.2%, above economists’ projections, with prices for items like rent, beef and juices and drinks rising 5.8%, 9.2% and 27%, respectively. A separate report showed that producer prices rose 1.6% last month on an annual basis, also more than expected.
“We don’t know if this is a bump in the road or something more” said Federal Reserve Chairman Jerome Powell during his Q&A following the decision while he reiterated the committee will remain data dependent.
While consumer inflation is down from its peak of 9.1%, it remains above the Fed’s 2% mandate.
U.S. NATIONAL DEBT TRACKER
Oil prices have also started to tick up, with West Texas Intermediate crude hovering above $80 per barrel, while Brent prices, the global benchmark, are near $86 a barrel.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| USO | UNITED STATES OIL FUND L.P. | 77.23 | -1.22 | -1.55% |
| BNO | UNITED STS BRENT OIL FD LP UNIT | 31.40 | -0.40 | -1.26% |
The average price for gas is $3.52 a gallon up from $3.44 a year-ago, as tracked by AAA.
Last week, Treasury Secretary Janet Yellen said in an exclusive interview with FOX Business that she regretted prior comments characterizing inflation as being “transitory” and while she noted prices are easing, the decline may not be “smooth.”
YELLEN: INFLATION DECLINE MAY NOT BE SMOOTH
FOX Business’ Megan Henney contributed to this report.
